The Economics of Derivatives

While most books on derivatives discuss how they work, this book looks at the contributions of derivatives to overall economic well-being. It examines both the beneficial and adverse effects of derivatives trading from the perspectives of economic theory, empirical evidence and recent economic history. Aiming to present the concepts in a fair, non-ideological, non-mathematical and simple manner, and with the authors' own synthesis, it draws on economic insights from relevant work in other disciplines, particularly sociology and law. The book also presents some new theoretical ideas and recommendations towards a pragmatic and practical approach for policy-makers. The ultimate objective is to provide a basic conceptual framework which will help its readers form a judgement on whether, when and how derivatives are beneficial or harmful to the economy.

• Discusses the extent to which derivatives markets perform socially useful economic functions
• Presents a brief historical perspective of the volume of derivatives trading in recent decades
• Examines the role of derivatives with reference to emerging markets in particular and developing countries in general
• Assesses the role of derivatives and finance in economic development